Donegal Group Inc. Q1 FY2024 earnings call

• Strategic nonrenewals in Commercial Lines in Georgia and Alabama largely completed in Q2 2024, with new business growth in targeted states and classes.
• Dedicated small business underwriting team working on accelerating growth in targeted geographic areas and classes.
• Personal Lines implementing significant rate increases to control exposure and drive performance improvement.
• Progress on systems modernization projects, including development of commercial systems release and regulatory filings for personal line software.
• Realigned regional structure to 4 regions for improved efficiencies, with success in Arizona new business activity.
• National account team contributing over 37% of new business in Q1.
• Targeted expense reduction initiative with progress in identifying savings.

Net premiums earned for the first quarter of 2024 increased 5.8% to $227.7 million. Net premiums written increased by 6%. For Commercial Lines, growth was slightly negative at minus 1% due to strategic nonrenewals in Georgia and Alabama, but excluding this, there was growth in active footprint with retention at 82%. Renewal rate increases were achieved, with commercial multi-peril at 13.3% and commercial auto at 11.4%. For Personal Lines, premium growth was 18.5% in the quarter, driven by 15.2% average rate increase for personal auto and 19% for homeowners. Rate increases in Personal Lines are expected to drive further performance improvements.

• Expect more meaningful increases in small business premiums as operating capabilities are refined throughout 2024 for 2025 growth.
• Earned premiums in Personal Lines expected to reflect higher rate increases in future quarters.
• Systems modernization projects to continue with phased rollout beginning in 2025.
• Anticipate further margin expansion from strategic initiatives.

• Higher impact of large fire losses contributed to the combined ratio increase.
• Unfavorable development in workers' compensation due to higher severity of previously reported losses in 2022 and 2023.
• Weather-related losses could impact results.
• Expense impact from systems modernization project in 2024 with approximately 1.3 points of expense ratio impact.

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